The Prime Minister:
The premise of the right hon. Gentlemans questionthat new powers are given to Europe as a result of the single legal personalityis wrong. It is made specifically clear that the single legal personality does not extend the powers of the European Union. That is stated in terms. As for the idea that Europe previously never had a legal personality, the European Union has already concluded scores of treaties; all this does is make sure that there are not two different methods, which sometimes come into conflict, for Europe to conclude treaties.

Gwyn Prosser (Dover) (Lab):
No group of people knows more about the effectiveness of the Governments immigration and asylum measures than my constituents in Dover, Deal and the wider east Kent area. They have seen a dramatic reduction in illegal immigration and a huge fall in unfounded asylum claims. Can my right hon. Friend tell them that nothing in the amended treaty will undermine any of those measures and risk returning us to the shambles we inherited from the Tories?

The Prime Minister:
On the judicial and home affairs power, it is important to recognise that we previously negotiated an opt-innot an opt-outto asylum and immigration measures. That was hugely important. If we had simply negotiated an opt-out, as the Conservatives didin my view mistakenlyon the social chapter, it would mean that we either had to stay out of everything or come into everything. Instead, what we negotiated on asylum and immigration was

Andrew Mackinlay:
A la carte.

The Prime Minister:
Exactly. It was a pick-and-choose method, which is absolutely the right thing to have on that. [ Interruption. ] Then the Opposition should be supporting us. As a result of that, for example, in respect of the immigration measures I think that we are returning about 120 or 130 failed asylum seekers to Europe every month. We could not have done that without the opt-in procedure. That is why it is important that we also have an opt-in procedure in respect of the judicial and criminal law systems. There may well be measures in Europe on which we want to co-operate with other countries, and the procedure gives us the ability to opt in when we want to, and opt out when we want to.

Mr. Richard Shepherd (Aldridge-Brownhills) (Con):
Between 1994 and 1999, the German federal authorities noted that 84 per cent. of their laws were passed in Brussels and only 16 per cent. in Berlin. Former German President Herzog commented, It has to be asked whether Germany remains unequivocally a parliamentary democracy. That question must also be asked about the United Kingdom. Does the Prime Minister not recognise that this country, after 30-something years in the European Union, which has developed into a great state, needs a referendum?

The Prime Minister:
First of all, Germany is a parliamentary democracyI mean, come off it. I have not come across those comments, but if the President made them, I disagree with them, and I suspect that most German people do. I do not think that when there 25 Jun 2007 : Column 36
was a German election recently, people thought that it was not a parliamentary democracy. Secondly, with respect [ Interruption. ] Well, with the greatest respect to Herzog, too. Let us look at what happened with the Single European Act and reflect for a moment on the things that have caused us most difficulty over the past few years. They are things such as the working time directive, and standardisation and harmonisation. They came out of the Single European Act. We need those provisions, however, because they allow us and our economy to operate on a more effective basis. I would say to the hon. Gentleman, who is absolutely sincere in his view, that in todays world, it is just not sensible for us to separate ourselves from Europe. None of the big issues that we need to deal with todayglobalisation, mass migration, organised crime and terrorism, and the environmentcan be dealt with by the nation state on its own. That is the purpose of the European Union.

Dr. Tony Wright (Cannock Chase) (Lab):
It is difficult to take entirely seriously the demand for a referendum from people who made the demand even before the treaty existed. The way to resolve all this is simply to say that Parliament will decidepreferably on a free vote. That will maintain parliamentary sovereignty, and enable most of us to follow the right hon. and learned Member for Rushcliffe (Mr. Clarke) into the Lobby of reason and common sense.

The Prime Minister:
With one exception, I agree entirely with what my hon. Friend says. In any event, it is important to recognise that it requires something fundamentally different about a particular treaty in Europe to justify a referendum. Incidentally, that is why not only is Britain saying that this is a conventional amending treaty, but so are the other countries, or many of the other countries that have had referendums. [Hon. Members: Ireland!] The reason for that is that Ireland has to have a referendum even on an amending treaty.

Mr. Ian Taylor (Esher and Walton) (Con):
I happen to be old-fashioned and believe that matters such as this should enhance parliamentary democracy by being discussed in the House; then we individually account for that at the general election. On the substance, it is all well and good to say that certain actions may be more coherently dealt with at a European level, but is the Prime Minister satisfied that the framework will work effectively? For example, Russia is trying to divide us on energy policy, Iran is taking advantages of divisions in approach and even America, with the coalition of the willing, attempted to divide the European Union. It is in Britains national interests to work much more collectively on the big issues. Is this the right framework, and does the Prime Minister believe that he is leaving as his legacy a European Union that will work more effectively in our common interest?

The Prime Minister:
I hope that is correct. One of the reasons why we should get off the endless debate about institutional mechanisms is that I have noticed from the European enlargement through which 12 new countries have come in, that Europe today works essentially though political alliances. To be absolutely 25 Jun 2007 : Column 37
frank, even under QMV, if our country has a major interest but we cannot assemble a blocking minorityincidentally, I cannot think of an occasion on which we have not been able to do that in the past 10 yearsthere is something wrong with the way in which we are going about building up political alliances.

The key thing is for Europe to decide its coherent direction. Whether it is on energy policy, the environment or any other issue, the institutional mechanisms will be only as good as the political direction that is using them. If the political direction is right, we have a chance of making Europe work more effectively. It is interesting that most objective observers would say that Europe has tended to move in the direction in which Britain has wanted over the past few years. We should use that and work on it.

Andrew Miller (Ellesmere Port and Neston) (Lab):
In respect of organised crime, was there any particular discussion about people trafficking? Is it not the case that the 27 working together can best deal with that serious problem that faces not just us but countries on the southern borders of Europe such as Malta, which has real difficulties because of the impact on its shores of organised crime from several north African countries?

The Prime Minister:
My hon. Friend is absolutely right. That is another area on which Europe should work more closely and integrate its policy to a greater extent. There is no way in which we can deal with organised crime and illegal immigration except, partly at least, on a Europe-wide basis. Illegal migration into Europe is a major problem for countries such as Malta and, to an extent, Spain. Europe should be using its collective power and strength to demand action by countries that are allowing such migration to spread to ensure that we protect European borders better. That is sensible, because we cannot protect our borders if people are coming into Europe illegally and then becoming migrants who are entitled to move right across Europe.

Mr. Peter Lilley (Hitchin and Harpenden) (Con):
Is the Prime Minister not aware that the issue of the referendum is ultimately a question of integrity, and of peoples ability to trust their politicians to keep the promises that they made at elections? The issue is not how similar this treaty is to treaties enacted decades ago, but how similar it is to the constitutional treaty on which it is based, and on which the Prime Minister promised the British people a referendum. Is it not clear that the similarities far exceed the differences, and that the German Chancellor, who said that the substance was unchanged and that only the terminology had changed, is more to be trusted than he is?

The Prime Minister:
I am afraid that I completely disagree with the right hon. Gentleman. It was interesting that he was unable to specify the major areas that require us to have a referendum. We have gone back on the constitutional treaty. For example, the common foreign and security policy now remains in a separate pillar, which is a major change from the constitutional treaty. It is absolutely clear that we have an opt-out from both the charter and judicial and home affairs. Those were the reasons why people like the right hon. 25 Jun 2007 : Column 38
Gentleman were saying that they wanted a referendum. As he knows, the truth is that he would demand a referendum in any set of circumstances, so that he could vote no, because he wants this country out of Europe.

Mr. Wayne David (Caerphilly) (Lab):
For some time, the debate about the future of Europe has been obsessed by rather esoteric institutional issues. Does the Prime Minister agree that this weekends agreement provides us with a golden opportunity to focus on the issues about which the people of Europe are concerned, such as the competitiveness of our economy, jobs for our people and enhancing our environment?

The Prime Minister:
My hon. Friend is entirely right. The agreement makes the changes that are necessary for the greater efficiency of the European Union and allows us to protect absolutely the national points of principle that we consider important. He is also right to say that as a result of that, we can move on to the areas of discussion in which the people of Europe are frankly far more interested than they are in the intricacies of the institutions.

Mr. David Curry (Skipton and Ripon) (Con):
Does the Prime Minister recall that when he reported on the G8 summit at the Dispatch Box just a few days ago, he said how optimistic he was about the progress of the world trade talks? Those talks collapsed at Potsdam, so is this not an especially bad time for the European Union to give the impression that it is resiling from its commitment to full competition? If nothing has changed, why have the words changed?

The Prime Minister:
The words have changed, of course, because they were in the constitutional treaty. I am afraid that this is what people will have to accept: I would have preferred to keep the words in, of course, but if I am laying down four vetoes, and red lines and so on, others will lay down their red lines, too. As a matter of fact, I think that we have protected completely the juridical and legal basis for the internal market, and that is extremely important. The right hon. Gentleman is right: I think that Europe must ensure that strong messages are sent out that the Commissions powers in that area remain unchanged, and that it will use those powers to enforce the internal market. As for the trade talks, it is correct that the Potsdam talks broke up without agreement. However, I still think that there is a possibility of getting this back on track. I have to say that the narrowness of the difference between the main countries now really would make it an act of gross irresponsibility on behalf of all of us if we did not conclude the deal. They are now very close. If we do not do it, we will deal a real blow to the multilateral system, and not merely to world trade.

Kate Hoey (Vauxhall) (Lab):
Does the Prime Minister not understand that no matter what he or anyone else says, the vast majority of the public will see that there has simply been a tweaking of words, and that the treaty is fundamentally no different from the original constitutional treaty? Why is he, and our Government, afraid of a referendum?

The Prime Minister:
The reason that I disagree with my hon. Friend is that it has changed fundamentally. First, it is no longer a constitutional treaty; it does not, 25 Jun 2007 : Column 39
for example, collapse the common foreign and security policy pillar, which is a major area. Secondly, in respect of the two areas that people worried about mostthe charter of fundamental rights, on which people said, Well, that is going to apply in British law, and judicial and home affairswe have opt-outs. That is what is different. With the greatest respect, it is important that people actually pay some attention to the facts when mounting their argument.

Dr. William McCrea (South Antrim) (DUP):
If the Prime Minister is so sure that the treaty is good for the United Kingdom and has the support of the British people, why is he afraid to put it to a referendum of the people, and why did he offer the possibility of a referendum in his last manifesto?

The Prime Minister:
I think I have explained already why I believe this to be completely differentbecause the constitutional treaty notion has been abandoned. Instead, we have gone back to a conventional amending treaty, and the truth is that we have never had referendums on such treaties. Let us also be very clear that the reason why the hon. Gentleman wants a referendum is to vote no, and he would vote no whatever was in the treaty.

Chris Bryant (Rhondda) (Lab):
Britain has been trying for many years to get a level playing field in energy policy, so that British people can own French energy companies, just as French people can own British energy companies, and so that we can keep fuel prices low in this country. Is it not vital for us to have qualified majority voting on energy policy, so that we can deal better with our country, and so that we can ensure a more united front when dealing with Russia?

The Prime Minister:
My hon. Friend is absolutely right, and it is one of the reasons why the deal that we have concluded is a good one for this country. Where we have agreed to QMV, we have not reluctantly accepted it; in the area that he is talking about, which is energy market liberalisation, we have advocated it. It is right that we do that. We know perfectly well that there may be countries that will always block energy market liberalisation, and that is why it is absurd to say that any QMV is bad for Britain. The question is in what areas we should have it, and he is right that in that particular aspect it is good for Britain.

Sir Peter Tapsell (Louth and Horncastle) (Con):
Does the right hon. Gentleman deny that his opposition to a referendum on the treaty really stems from his certain knowledge that, given a chance, the British people would always vote, by a large majority, against any increase of foreign power over British self-governing democracy and our national sovereignty?

25 Jun 2007 : Column 40

The Prime Minister:
No, I am afraid that I do not agree with that at all, and the reason why I think it is important that we proceed in the way that I have outlined is that the treaty is a conventional amending treaty. We have never had referendums on them. I might remind the hon. Gentleman that in the one referendum that we did have, we voted to stay in Europe.

Richard Younger-Ross (Teignbridge) (LD):
Could the Prime Minister explain why, apart from the last seven days before the Council, Britain entered into no pre-Council negotiations and no pre-Council discussions? The rest of Europe were talking to each other; why was Britain silent?

The Prime Minister:
What is he talking about? [ Interruption . ] We have been talking about this for two years.

Richard Younger-Ross indicated dissent.

Mr. Boris Johnson (Henley) (Con):
Can the Prime Minister confirm that by handing over QMV in transport, energy and technology he has made it possible for other European countries to impose a new European institute of technology, of whatever kind they want, at whatever expense they desire, in defiance of the wishes of his Government? Is that the case, and if he does not know, why not?

The Prime Minister:
Actually, I am afraid that I do know. The European institute of technology is a good idea, and we happen to support it

Mr. Johnson indicated dissent.

The Prime Minister:
The hon. Gentleman is shaking his head already. I was just about to explain what it does. It allows us, across Europe, to work on technological projects that have a Europe-wide applicationbut because it has the word European in it, he is against it.

Several hon. Members rose 

Mr. Speaker:
Order.

FINANCE BILL [WAYS AND MEANS]

Resolved,

Expenses of management

That provision may be made in the Finance Bill about expenses of management (and amounts deductible like expense of management). [ John Healey.]

25 Jun 2007 : Column 41

Orders of the Day

Finance Bill

As amended in the Committee and in the Public Bill Committee , considered.

New Clause 5

Restriction on expenses of management

(1) Section 75 of ICTA (expenses of management: companies with investment business) is amended as follows.

(2) After subsection (2) insert

(2A) A deduction is not to be allowed under that subsection for any particular expenses of management if any part of those expenses is incurred directly or indirectly in consequence of, or otherwise in connection with, any arrangements the main purpose, or one of the main purposes, of which is to secure the allowance of a deduction (or increased deduction) under that subsection or any other tax advantage.

(2B) Subsection (2A) above does not apply if, as a result of paragraph 7A of Schedule 23A (manufactured payments under arrangements having an unallowable purpose), the company incurring the expenses is not entitled to a relevant tax relief (within the meaning of that paragraph) in respect of, or referable to, the whole or any part of the expenses.

(2C) The reference in subsection (2A) above to expenses of management includes amounts treated by any provision as deductible under this section.

(3) After subsection (5) insert

(5A) For the purposes of subsection (5)(a) above investments are not held for a business or other commercial purpose if they are held directly or indirectly in consequence of, or otherwise in connection with, any arrangements the main purpose, or one of the main purposes, of which is to secure the allowance of a deduction (or increased deduction) under subsection (1) above or any other tax advantage.

(4) After subsection (10) insert

(11) In this section

arrangements includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

tax advantage has the meaning given by section 840ZA.

(5) The amendments made by this section have effect in relation to accounting periods beginning on or after 20th June 2007, but have no effect in any case where the particular management expenses in question were paid before that date.

(6) In the case of an accounting period of a company beginning before, and ending on or after, that date, those amendments have effect as if, for determining the amounts that are deductible for the period under section 75(1) of ICTA, so much of the period as falls before that date, and the rest of it, were separate accounting periods.. [John Healey.]